Equity compensation plans not only create financial incentives for employees but can also be a significant factor in attracting and retaining talent.
A new survey from Schwab Stock Plan Services shows that equity compensation accounts for a large portion of respondents' net worth, with many employee portfolios overweighted in company stock — even though the vast majority say their investment accounts are regularly rebalanced.
Logica Research (formerly Koski Research) conducted an online survey in July of 1,000 employees of companies that offer equity compensation plans. These were currently participating in such a plan and were between 25 and 70 years old. Their average total value of equity compensation was $98,908. Survey participants were not asked whether their employer had accounts with Schwab Stock Plan Services.
Some 40% of respondents — and 60% of millennials — said equity compensation was a chief reason they took their job, and three-quarters said it was a very important or even an essential benefit.
They reasoned that equity compensation allowed them to participate in their company's growth, thought it would help them amass wealth, said it meant that the success of their company would play an important role in their own success and expected it to ease some of their financial stress.
Equity compensation accounted for nearly 30% of the net worth of survey participants who received stock options or restricted stock awards and/or participated in employee stock purchase plans.
For millennial workers, equity compensation made up 42% of net worth, compared with 24% for Gen X employees and 19% for their boomer counterparts. Seventy-three percent of employees surveyed also owned company stock outside of their equity compensation plan, 44% in their workplace retirement plans.
Maintaining a high proportion of company stock appeared to be intentional. The survey found that 81% of employees said either that they had rebalanced their investment accounts in the past 12 months or that their account automatically rebalanced itself. Two-thirds said they took their equity compensation or ESPP into account when rebalancing.
"For some investors, too much company stock can be too much of a good thing," Marc McDonough, senior vice president at Schwab Workplace Financial Solutions, said in a statement.
